Posts Tagged ‘counterfeiting’

Editors’ Note: As Fortress Paper’s Chairman, Chief Executive Officer, and Director, Chad Wasilenkoff oversees the company’s production of security and other specialty papers. Most recently, Wasilenkoff was the Chief Executive Officer and Director of Titan Uranium Exploration Inc. from July 2004 to July 2006 and an independent private equity investor from October 2002 to January 2004. From 1997 to 2002, Wasilenkoff was an investment advisor and financial planner at Canaccord Capital Corp. He has a Bachelor of Arts degree from The University of British Columbia.

Company Brief:Fortress Paper is a leading international producer of security and other specialty papers and pulp. The company operates three mills: the Landqart Mill in Switzerland, the Dresden Mill in Germany, and the recently acquired Fortress Specialty Cellulose Mill in Thurso Quebec, Canada. Fortress Paper’s security paper includes banknotes, passport, and visa papers and its specialty papers include non-woven wallpaper base products and graphic and technical papers. Its specialty pulp business currently includes NBHK and the mill is undergoing a conversion to dissolving pulp for the textile industry in Asia. As an extension of its security papers business, the Landqart Mill has been actively developing and marketing innovative paper-based security products.

What did you see in the market that made you feel Fortress Paper would be successful?

My background is as more of a contrarian investor, so I always start from the bottom up. I was looking at the forestry sector – everything else was taking off, but this was still in a steady decline and had been for 12 to 15 years. So I evaluated pulp companies and commodity paper companies, and found these two niche paper mills that were world class in what they did. They had growth industries in both of their core products, but what they lacked was a strong and focused management team and growth capital. So that’s how we built the company.

What is produced at each of the mills?

Our German mill, located just outside Dresden, specializes in a non-woven wallpaper base. Most wallpapers are traditionally made from a regular kraft pulp, and that is what leads to the problem of trying to remove the paper. Because of that, the industry was going through challenging times. It had been in about a 10 to 12 decline, it has since steadied and been fairly stable and mature. The reason for that stability is because the industry got together and created this non-woven product where we put synthetic fibers into the paper. With those synthetic fibers, we get the strength characteristics and it becomes dry-stoppable. So now, once you’re able to pull a corner away, it comes off in one pull. While the overall wallpaper market is stable, this non-woven product is growing within it at about a 15 to 20 percent per annum growth rate, and we currently represent 50 percent of the world production of non-woven wallpaper.

The other mill is our Landqart mill, based in Switizerland, and it specializes in high-security paper. What we’re best known for is the banknote side of things. We’re the sole maker of the Swiss Franc, which is the industry standard – it is the currency by which all international banks measure themselves. It has more security features than any other currency in the world and one of the lowest counterfeit rates. It has never had a professional counterfeit attempt against it.

We also make the Euro for about 10 different countries, passports for dozens of countries, the entry visa sticker for India and China, and brand protection for companies like Rolex.

Our latest acquisition, Fortress Specialty Cellulose, was a shut down NBHK Mill in Thurso Quebec, Canada. We put together a plan to purchase the mill and convert it to a higher margin product, dissolving pulp, which is primarily used for producing rayon in Asia. Most of the financing for the $153 conversion was provided by the Quebec government.

What impact is new technology having on counterfeit issues?

Probably the biggest change in the global counterfeiting market has been the advancement of color photocopier standards. Now anybody can go onto eBay and buy regular home officer equipment and do a half decent job of counterfeiting. A lot of money goes into research and development and new technologies to try to make it as difficult as possible for these counterfeiters. Unfortunately some of these products are too successful and they get commercialized. For instance, the hologram that you typically find on a banknote, you can now buy holographic wrapping foil, and with a fairly rudimentary stamp, create your own hologram with that denomination on it. So while it was a spectacular feature when it began, it is slowly losing ground. They are now continuing to work on holograms to try to improve them, to make them a lot more complex and difficult.

What are your key priorities over the coming year to make sure the growth continues and the brand remains strong?

When I bought the company, I had a three-stage long-term plan: stage one was to change and focus on hiring and retaining good management; the second stage was dealing with internal or organic growth, and leveraging off our existing assets; the third stage was going external, so now it’s more of a focus on mergers and acquisitions.

In our industry, especially on the banknote side, cost is probably fifth or sixth on the list for national banks. It’s reputation first and foremost. It’s and industry that is not going to shift over to low-cost production regions. It’s just too important of a product worry about coming from a low-cost environment. So it’s about reputation, quality, new innovative products, high-security measures, and staying ahead of the counterfeiter. It’s such an important product that they’re willing to pay for a new world-class innovative technology and security feature. We’d like to find small companies that have these great products but can’t break into the banknote industry because it is so conservative. A lot of the printers or papermakers have been around for more than 300 years, so nobody wants to take a chance on a little supplier. We can take a small company that has a world-class product, and acquire it or do a joint venture or at least enable the security of that particular product, and we can launch it under our umbrella, giving it the reputation.

Do you see yourself in this business for the long term?

We have a lot to accomplish with Fortress Paper and one of our biggest challenges today is our share price. While our stock is currently undervalued, we are working to ensure that our shares trade closer to the industry averages that will enable us to make creative acquisitions that increase our reach and technological acumen. At some point in the foreseeable future, I am likely to relinquish the CEO title but stay on Chairman and a happy shareholder.

Counterfeiting has never been easier. All it takes these days is a fairly inexpensive color printer, some graphic design software and a willingness to spend a few decades in jail if you get caught.

But desperate times call for desperate measures, so criminals struggling in a tough economy and savvy with advanced printing equipment have figured out how to replicate bank notes. Some bleach $1 bills and print $100 bills; others use holographic wrapping paper available at any dollar store. And it’s not just the little guy. The big guys — the major crime syndicates — have set up complex printing operations to print illegal tender in large quantities.

Fake bills look remarkably similar to the real McCoy, with intaglio (textured printing) and holographic markings.

“Internationally, we have seen a marked increase in counterfeiting in the last five years,” says Bonnie Schwab, a consultant who worked for the Bank of Canada and has advised the Central Bank Counterfeit Deterrence Group. “Causes are improvement in technology available to the general public and to the traditional counterfeiters. More and more people with little skill in design and printing are able to download images and print to desktop printers.”

Because your basic inkjet printer is constantly improving in output quality, the best way to combat counterfeiting is not to create increasingly intricate designs, but rather to improve the paper it’s printed on.

Security fibers like these are embedded in bills from Fortress Paper.

One approach is to make the printing process and substrate — the layer beneath the surface of the paper — more complex and difficult to replicate, even for the pros.

Polymer-based currency, first developed in Australia, has become common and is harder to counterfeit. In 2008, Crane Currency started using a “nano thread” for $100 bills that allows the Bureau of Engraving and Priting to embed new security features, including a strip that becomes visible only when you hold the C-note up to the light.

The U.S. Treasury has taken other measures, including the new $5 bill with its color-shifting ink, an embedded watermark, and a different color that glows for each bill when you hold it up to an ultraviolet light source. Yet according to Schwab, because U.S. bills are so popular all over the world, they are a prime target for counterfeiters, and given enough time and the right technology, criminals tend to learn even the most advanced techniques.

A new option — announced at the Bank Note 2009 Conference in Washington last week — is a hybrid paper called Durasafe, which uses a three-layer substrate made with a polymer core and a 100-percent cotton outer layer.

Made by from Fortress Paper, Durasafe’s major advancement is a transparent window that can be any shape and size. Criminals have a hard time replicating these windows because of the complex printing process involved.

“Durasafe uses two substrates with a window in between, so that rules out printers and advanced color copier machines,” says Russell Stanley, a financial analyst with Jennings Capital.

Chad Wasilenkoff, the CEO of Fortress Paper, says Durasafe is also designed to last twice as long as traditional banknote paper, which is an attractive option for national banks — especially in the U.S. where, he says, there are as many as 1 million fake bills in circulation. Durasafe-based currency will stay in circulation longer and, Wasilenkoff says, the printing costs will be similar to traditional banknotes.

“Durasafe acts like a sponge for the polymer and improves the tactility of the bank note,” says Wasilenkoff, who explained why the touch and feel of a banknote are important for the “level one” security concern, meaning the first point of contact that criminals make. In most cases, counterfeiters pass fake bills off at nightclubs and McDonald’s or Starbucks in a chaotic or low-light environment. When a bill just doesn’t feel right, the cashier might take the time to inspect the currency.

Vancouver-based Fortress would not comment on which countries may end up using the bills, due to security concerns. But the company says the first mass-produced banknotes that use Durasafe will appear in late 2010.

Fortress Paper’s President & CEO, Chad Wasilenkoff, talks to the Business News Network (BNN) about his company’s focus on non-woven wallpaper & security paper, and speaks about upcoming innovations at their Landqart Mill in Switzerland.

With counterfeit banknotes, ID papers, and open-air admission tickets becoming increasingly easier to produce and more frequent due to technological advances in scanning and colour printing, the need for security papers that can’t be copied is on the rise.

In response to this demand, Fortress Paper has developed Irisafe – a security feature that cannot be duplicated by colour copiers or scanners.

Irisafe is an iridescent striped coating that is integrated into security papers and is characterized by brilliant and changing colours when you change the angle of view.

If an Irisafe stripe were present in a $20 bill, for example, the radiant colours on the stripe would change when you moved the bill at various angles – easily visible to anyone, even in less than optimum light conditions.

To further enhance the security feature, more than one stripe can be used on the same security paper.

By placing two or three different coloured iridescent stripes next to each other, the colour change between the different stripes is amplified and intensified to the naked eye when the angle is changed.

A colour copier cannot reproduce either the brilliancy or the change of colour. At best, a photocopied forgery will show spotty stripes instead of the trademarked Irisafe qualities.

On top of all this, various machine-readable invisible tracer substances and pigments can also be integrated into the stripes, further increasing the safety provided by Irisafe.